EZCORP Announces First Quarter Fiscal 2017 Results

Total revenue up $5.1 million to $192.6 million (up $9.8 million to $197.4 million on a constant currency basis1).

Profit before tax more than doubled to $13.0 million ($13.9 million on a constant currency basis); four consecutive quarters of YOY profit growth.

Earnings per share from continuing operations increased to $0.15 from $0.06.

All amounts in this release are from EZCORP continuing operations and in conformity with U.S. generally accepted accounting principles ("GAAP") unless otherwise noted. Comparisons shown in this release are to the same period in the prior year unless otherwise noted.

AUSTIN, Texas, Feb. 02, 2017 (GLOBE NEWSWIRE) -- EZCORP, Inc. (NASDAQ:EZPW), a leading provider of pawn loans in the United States and Mexico, today announced results for its first quarter ended December 31, 2016.

HIGHLIGHTS FOR FIRST QUARTER FISCAL 2017

Improvements to earning assets generated revenue and profit growth:

Positive PLO growth in U.S. and Mexico:

– Market leading growth in same store pawn loans outstanding (PLO) up 3% in U.S. and down 4% in Mexico (up 14% on a constant currency basis).

– Leading the U.S. market with average PLO of $287,000 per store.

Delivering profitable growth:

– Growth in revenue and profit before tax, four consecutive quarters of YOY profit growth.

– Corporate expense savings of 30%; on track for $50 million in FY18.

– Significant investment in field leadership and customer-facing team members in U.S. Pawn, adding 224 store Team Members, nine field human resources managers, six District Managers and two Divisional Vice Presidents to improve customer experience, particularly during peak sales season; offset impacts of staff turnover; and better coach & mentor store managers.

Collected $7.8 million in principal on notes receivable from the Grupo Finmart sale during the current quarter, and anticipate collection of an additional $37.4 million in principal during the remainder of fiscal 2017.

CEO COMMENTARY AND OUTLOOK

Stuart Grimshaw, EZCORP's Chief Executive Officer, said: "Our first quarter results reflect the continued intense focus on market leadership in meeting our customers' desire for cash whenever they want it, combined with consistent execution in pawn fundamentals. We delivered strong operating results in our pawn businesses in the U.S. and Mexico with continued growth in same store pawn loans outstanding (PLO), the most influential driver of revenue and profitability.

"We continue to drive corporate expense savings as we move to a leaner business model and remain on track to reduce corporate expense to $50 million in FY18 from $68 million in FY16. We are reinvesting a portion of the savings into initiatives to better serve our customers, including product and customer data analytics and feedback; upgrading our technology; and training, coaching and mentoring programs for our field team. We have also made significant investments in field leadership and customer-facing Team Members. We plan to open about ten new stores in Mexico in FY17.

"We are confident that all these initiatives will continue to improve our pawn operating performance and provide a platform for profitable growth."

1In addition to the financial information prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), we provide certain financial information on a “constant currency” basis, which excludes the impact of foreign currency exchange rate fluctuations. For additional information about the constant currency calculations, as well as a reconciliation of the constant currency financial measures to the comparable GAAP financial measures, see “Non-GAAP Financial Information” at the end of this release.

CONSOLIDATED RESULTS

Total revenue up $5.1 million to $192.6 million, and income from continuing operations net of tax increased $4.8 million to $8.3 million. (On a constant currency basis, total revenue was up $9.8 million to $197.4 million and income from continuing operations net of tax was up $5.6 million to $9.1 million.) These results were driven by continued intense focus on market leadership in meeting our customers' desire for cash.

Total operating expenses decreased $7.4 million, or 7% (5% on a constant currency basis). This included a corporate expense decrease of $6.1 million to $13.9 million, or 30% lower, driven by a leaner business model.

OPERATING METRICS

U.S. Pawn Segment

Continued focus on meeting customers' desire for cash resulted in an increase in total PLO of 4% to $148.6 million, up 3% on a same store basis.

Pawn Service Charges (PSC) increased 4% to $61.0 million, up 3% on a same store basis.

Merchandise sales increased 3%, both in total and on a same store basis. The merchandise sales gross margin of 36% remained within our target range of 35-38%, although it was 400bps lower than the prior-year quarter.

Slight increase in aged inventory to 9% from 8% of total inventory at the end of the previous quarter, although improved to 9% from 11% at the end of the prior-year quarter.

– 224 customer-facing store Team Members, and field leadership positions including two Divisional Vice Presidents, six District Managers and nine field Human Resources Managers; and

– Commenced store preventative maintenance program.

Segment profit before tax decreased $1.7 million, or 6%, to $27.1 million as a result of increased investments in store operations (as shown above).

Mexico Pawn Segment

PLO decreased 3% to $14.1 million, compared to an increase of 13% in the prior-year quarter (up 16% to $16.8 million on a constant currency basis. PSC remained flat at $8.0 million, but was up 18% to $9.4 million on a constant currency basis.

Merchandise sales were flat, both in total and on a same store basis (up 19% in constant currency). Merchandise margin of 31%, 400bps lower than the prior-year quarter.

Segment profit before tax increased 194%, or $2.8 million, to $4.2 million (up 249%, or $3.6 million on a constant currency basis).

Maintained aged inventory levels at 5% of gross inventory, although slight increase from 3% at the end of the previous quarter.

CONFERENCE CALL

EZCORP will host a conference call on Friday, February 3, 2017, at 7:30am Central Time to discuss first quarter results. Analysts and institutional investors may participate on the conference call by dialing (877) 201-0168, Conference ID: 62600120, international dialing (647) 788-4901. The conference call will be webcast simultaneously to the public through this link: http://investors.ezcorp.com/. A replay of the conference call will be available online at http://investors.ezcorp.com/ shortly after the call.

ABOUT EZCORP

EZCORP is a leading provider of pawn loans in the United States and Mexico. At our pawn stores, we also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers.

FORWARD LOOKING STATEMENTS

This announcement contains certain forward-looking statements regarding the company’s strategy, initiatives and expected performance. These statements are based on the company’s current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the company's strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates, will, should or may occur in the future, including future financial or operating results, are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including operating risks, liquidity risks, legislative or regulatory developments, market factors or current or future litigation. For a discussion of these and other factors affecting the company’s business and prospects, see the company’s annual, quarterly and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Class A Non-voting Common Stock, par value $.01 per share; shares authorized:100 million as of December 31, 2016 and September 30, 2016; issued and outstanding: 51,306,608 as of December 31, 2016 and 51,129,144 as of September 30, 2016

In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), we provide certain other non-GAAP financial information on a constant currency basis ("constant currency"). We use constant currency and ongoing segment contribution results to evaluate results of our Mexico Pawn operations, which are denominated in Mexican pesos and believe that presentation of constant currency results are meaningful and useful in understanding the activities and business metrics of our Mexico Pawn operations and reflect an additional way of viewing aspects of our business that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. We use this non-GAAP financial information to evaluate and compare operating results across accounting periods. Readers should consider the information in addition to, but not instead of or superior to, our financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Constant currency results reported herein are calculated by translating consolidated balance sheet and consolidated statement of operations items denominated in Mexican pesos to U.S. dollars using the exchange rate from the prior-year comparable period, as opposed to the current period, in order to exclude the effects of foreign currency rate fluctuations. We used the end-of-period rate for balance sheet items and the average closing daily exchange rate on a monthly basis during the appropriate period for statement of operations items. The end-of-period exchange rate as of December 31, 2016 and 2015 was 20.7 to 1 and 17.3 to 1, respectively. The approximate average exchange rate for the three months ended December 31, 2016 and 2015 was 19.8to 1 and 16.8 to 1, respectively, however our statement of operations constant currency results reflect the impact of monthly effects of exchange rates and so are not directly calculable from the above rates. Constant currency results, where presented, also exclude the foreign currency gain or loss and the related foreign currency derivative gain or loss impact.

The following information provides reconciliations of certain non-GAAP financial measures presented in this press release to the most directly comparable financial measures calculated and presented in accordance with GAAP as of and for the three months ended December 31, 2016.

Miscellaneous Non-GAAP Financial Measures

U.S. Dollar Amount

Percentage Change YOY

(in millions)

Consolidated revenue

$

192.6

3

%

Currency exchange rate fluctuations

4.8

Constant currency consolidated revenue

$

197.4

5

%

Consolidated income from continuing operations before income taxes

$

13.0

152

%

Currency exchange rate fluctuations

0.9

Constant currency income from continuing operations before income taxes

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